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What reporting and registration requirements do I have for a closely held payee?

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I have a small business (sole trader) which has been making sales since July/August 2019. Last financial year, I turned over approx 60k so didn’t need to register for GST. My expenses/costs were approximately also 60k (given it was my first year in business I had a lot of outlay and expenses in getting set up), so although I didn’t pay any tax during the year I don’t think my liability should be too big (if I have one at all).

In November 2019, I started paying my de facto partner to help out in my business every 3rd weekend so that he could have some extra money to spend as he liked and so that I could get some much needed help. I have been paying him manually and putting aside an extra 40% in the bank to cover any tax he’d have to pay at the EOFY.

At the time, I had received some advice from a family member (which I now think might be incorrect) that because my partner is a close relative, I only have to report the amount I have paid him at the EOFY using a special form and that I pay the tax I withheld at this stage.

Now that it is EOFY and now that I’ve had a good look at this and tried to find this ‘special form’, I am starting to worry that I was misinformed by my well meaning family member.

I am finding a lot of information on the ATO website that talks about ‘Installment Activity Statements’ and ‘PAYG withholding reporting’ and ‘Single Touch Payroll’ and ‘Payment Summary Annual Reports’ - I don’t understand which of these I am meant to fill out or how often I need to record all of this, even after having spent 2 days reading and reading all the info on the website I have just become more and more confused. So much of the ATO website is contradictory, so as soon as I think I might have worked out what I need to do, I end up back at square one.

And I’ve also been confused by what effect the fact that my partner is ‘close held payee’ has on all of this? I am not sure if I am registered for PAYG withholding either; I thought I had done this through Xero but now I think that I was incorrect with this as well.

Please can someone help!
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Hi @Sarah123 ,

 

Sorry to hear you're having a difficult time working things out.

 

If your de facto is an employee, you'd be required to register for PAYG withholding and withhold the appropriate amounts from salary/wages then pay the withheld amounts to the ATO when you lodge your BAS. Do you receive BAS with withholding labels (eg W1, W2 labels)? If these labels aren't on your BAS or you don't receive a BAS at all it'd indicate you're not registered for PAYG withholding.

 

If your de facto is a contractor (eg. sole trader/ contractor working under their own ABN) then you don't have withholding requirements.


PAYG instalments are different to PAYG withholding. With PAYG withholding, employers collect tax from the payments they make to employees and contractors and send it to the ATO. This helps those people meet their own income tax liabilities.

 

Single Touch Payroll (STP) is a way of sending salary and wage information, PAYG withholding and super information to the ATO electronically. For employers with 4 or fewer employees, reporting through STP became compulsory from 1 July 2019. There's an exemption for small employers (those with 19 or fewer employees) where you don't need to report 'closely held payees' through STP-enabled software until 1 July 2021.

 

I hope this information helps and let us know if you have any further questions,

JasonT

1 REPLY 1

Most helpful response

Community Support

Replies 0

Hi @Sarah123 ,

 

Sorry to hear you're having a difficult time working things out.

 

If your de facto is an employee, you'd be required to register for PAYG withholding and withhold the appropriate amounts from salary/wages then pay the withheld amounts to the ATO when you lodge your BAS. Do you receive BAS with withholding labels (eg W1, W2 labels)? If these labels aren't on your BAS or you don't receive a BAS at all it'd indicate you're not registered for PAYG withholding.

 

If your de facto is a contractor (eg. sole trader/ contractor working under their own ABN) then you don't have withholding requirements.


PAYG instalments are different to PAYG withholding. With PAYG withholding, employers collect tax from the payments they make to employees and contractors and send it to the ATO. This helps those people meet their own income tax liabilities.

 

Single Touch Payroll (STP) is a way of sending salary and wage information, PAYG withholding and super information to the ATO electronically. For employers with 4 or fewer employees, reporting through STP became compulsory from 1 July 2019. There's an exemption for small employers (those with 19 or fewer employees) where you don't need to report 'closely held payees' through STP-enabled software until 1 July 2021.

 

I hope this information helps and let us know if you have any further questions,

JasonT